The term “data card” conventionally refers to cards that have a magnetic strip containing a limited amount of read-only data. These cards also include other identifiers such as imprinted names, card expiration dates, and account numbers, to name just a few. Examples of data cards include financial cards such as credit cards, debit cards, ATM cards, as well as non-financial data cards for example department store cards, car rental cards, hotel cards, airline cards, etc. Data cards can also include driver's licenses, transit cards, building security cards, and personal identification cards, and the like. Data cards are very common and most people carry one or more of the various types of data cards.
Data card security relies on the physical security of the card, as well as the privacy of the credit card number and other identifying information, such as the user name. Therefore, whenever a person other than the card owner has access to the card or its number, security is potentially compromised. Data on the magnetic stripe can also easily be read, written, deleted or changed with off-the-shelf equipment. Therefore, the magnetic stripe is not the ideal place to store sensitive information. The low security of the data cards presents countless opportunities for fraud. This opportunity has created a huge black market in stolen card numbers.
A smart card, chip card, or integrated circuit(s) card (ICC), is a device that includes an embedded integrated circuit that can be either a secure microcontroller or other intelligence with internal memory, or a memory chip alone. With an embedded microcontroller, smart cards have the unique ability to store large amounts of data, carry out their own on-card functions (e.g., encryption and mutual authentication) and interact intelligently with a smart card reader. Smart card technology has international standards (ISO/IEC 7816 and ISO/IEC 14443) for conformance, and is available in a variety of form factors, including plastic cards, fobs, subscriber identification modules (SIMs) used in GSM mobile phones, and USB-based tokens to name a few. Smart cards are engineered to be tamper-resistant, for example many include the ability to implements a cryptographic algorithm. For banks interested in reducing fraud, in particular resulting from counterfeit, lost and stolen data cards, utilizing smart cards can result in a quantifiable benefit.
As will be appreciated, conventional data cards have limited capabilities while smart cards can hold much more information along with providing enhanced security features. The applications for smart cards is widespread, including but not limited to their use as credit or ATM cards, SIMs for mobile phones, authorization cards for pay television, high-security identification and access-control cards, and public transport payment cards. Smart cards may also be used as electronic wallets. The smart card chip can be loaded with funds that can be spent in parking meters and vending machines or at various merchants. Smart cards also allow multiple card issuers to be represented with a single card, thereby allowing consumers to carry just one card for several types of transactions, including those identified above.
Smart cards are gaining popularity in the United States and have already found wide acceptance across Europe. The Frost & Sullivan Americas Smart Card Market Analysis report published in collaboration with the Smart Card Alliance in September 2005 predicts that the smart card industry will grow rapidly in North America, at a 27.7 percent compound annual rate over the next five years, from the 132.2 million cards shipped in 2004. The same report predicts even greater growth in Latin America, namely a 59 percent compound annual growth rate over the next five years, from 136.4 million cards shipped in 2004.